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BoC Appeared To Mean Conditional Pause More Or Less Intact Yesterday

CANADA
  • Rogers implies any reading between the lines on the tweaking of yesterday’s forward guidance as a marginally hawkish signal was unfounded: “It’s a conditional pause, though. If economic developments unfold as we projected and inflation comes down as quickly as we forecast in the January MPR, then we shouldn’t need to raise rates further. But if evidence accumulates suggesting inflation may not decline in line with our forecast, we’re prepared to do more.”
  • That's doubly so with the speech noting how Canada has seen the more aggressive tightening cycles of the G7.
  • No mention of excess demand but the weak productivity growth seen is further pushed as an offsetting hawkish angle, whilst also wanting to see further progress in service inflation rather than the levelling out.
  • Market reaction is limited on the remarks with Canada & US jobs reports eyed tomorrow, although the more explicit push to more locally driven mon pol at this stage of the cycle might reduce spillover from the latter. 2Y GoCs have rallied 2.5bps since the remarks for -7.5bps on the day but are led by Tsys at -16bps.
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